FX Commentary 7 March 2019

Market Talk

– May’s spokesman said talks in Brussels were difficult but is ongoing. More EU officials are pessimistic about a breakthrough in Brexit talks. A Reuters’ poll predicted Sterling would lose 9% of its value and trade at 1.20 against the US$ in the immediate aftermath if UK leaves EU without a deal.

– Fed’s member Williams said the persistence of low inflation further curtailed expectation of interest rate hikes in the near future. A likely delay in US interest rate hike and a record US trade deficit in 2018, led to US$ weakening against its peers.

– Aussie dollar was the worst performer for the day after a woeful GDP numbers and comments by RBA’s governor Lowe that while probabilities of a rate decision is evenly balanced; it was difficult to imagine rate will rise in 2019. The likelihood of a RBA rate cut in 2019 has jumped to 73% from 58% the day before.

Bank of Canada kept its interest rate unchanged at 1.75% as expected. BOC expects the economy to be weaker in the first half of 2019 than the bank had projected in January.

– ECB’s rate announcement is at 8.45pm and press conference is at 9.30pm tonight. News wire reported that ECB are waiting to see how the economy performs before making an announcement on LTRO or TLTRO. This is keeping the Euro currency weak.

Chart Focus EUR/USD

Key Points

1. Trading Sell on EUR/USD

2. Sell EUR/USD at 1.1315. Stop at 1.1350 and target at 1.1250

3. Quantitative easing fear and interest rate differential are weighing on the EURO currency.

4. Price capped at resistance with MACD bearish is hinting of a price decline.

Fundamental Comments

1. Reports of more ECB quantitative easing is likely to weigh on EURO currency

2. A big difference in interest rate differential is favouring the US$

Technical Comments

1. 20EMA resistance together with a previous price low is capping EUR/USD

2. MACD is bearish and histogram could be about to turn down

Key Levels

Support 1.1285 1.1250 1.1230
Resistance 1.1320 1.1365 1.1390

Technical Overview

USD/JPY – Price has been on a decline for the past 2 days. We are expecting price to move lower to 111.45, turning up from 111.45 for a rally to 112.25 in the next few days. MACD is turning around and Stochastic is close to oversold zone. This is a hint that price may be close to a low.

Support 111.60 111.25 110.95
Resistance 111.85 112.15 112.45

AUD/USD – Price reached a low of 0.7019 overnight and has since moved higher to 0.7050. Inability to move above this resistance would hint of another test to 0.7020 while above this resistance point would confirm a temporary low at 0.7019. It would call for a move higher to 0.7115. MACD and Stochastic are both weak and we favour more declines.

Support 0.7020 0.6985 0.6935
Resistance 0.7050 0.7090 0.7115

GBP/USD – Price has been slow due to a lack of Brexit developments. It is likely price will move with technical since they is little on the Brexit news front. The rally seems corrective and there is a good chance price will test the low at 1.3100 again in the next 2 days. A move above 1.3220 would negate our bearish view.

Support 1.3150 1.3120 1.3095
Resistance 1.3185 1.3210 1.3240

XAU/USD – Price reached a high of 1290.90 overnight and the corrective rally may have ended with this high. If price is unable to move above this high, there is a high chance that price will decline to 1281.40 previous low again. Both momentum oscillators are weak and hinting of more price declines.

Support 1285.30 1281.10 1276.50
Resistance 1290.90 1296.70 1304.10

AUD/JPY – Our sell call from yesterday was filled and we are now short at 78.70. Our view remains the same. Keep stop at 79.15 and target at 78.05. Stochastic is turning up but MACD is still bearish. We expect price to be capped at 78.80 and a decline to follow.

Support 78.50 78.10 77.85
Resistance 78.80 79.15 79.50

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